How to scalp profits from Twitter and other growth stocks

By Shawn Langlois

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FOMO — not to be confused with YOLO or LMAO — is a hashtaggy acronym for “Fear Of Missing Out.”

BuzzFeed describes it as “the insidious ghost hand of fun that reaches its cold skeletal claw on your shoulder when you’re at a bar and see your Twitter timeline full of friends tweeting about being at karaoke.”

But, for grownups with a job, a family and a retirement to consider, it’s also a factor when it comes to investor psychology. Especially when we’re trying to navigate one of the most distrusted and maligned rallies of all time.

Dan Steinhart , in a good read from the Casey Report, tackled FOMO as it pertains to these kinds of markets. He spins a yarn about how hard it is to keep focused and investing rationally when everybody from your mailman to your NASCAR-loving idiot brother-in-law keeps raking it in. Eventually, impatient cash turns reckless.

“FOMO is a powerful motivator and causes smart investors to do stupid things, like go all-in at the worst possible moment,” he said. “Which is no small concern, since it undermines one of the most powerful investment strategies: keeping liquid cash in reserve to invest during market panics.”

There will be a time — many believe soon (see our chart of the day) — when this market will finally take one in the gut and offer those with cash some tasty opportunities. But will you have any when that time comes?

Steinhart offered this quote from Benjamin Roth’s diary during the Great Depression: “Again and again during this depression, it is driven home to me that opportunity is a stern goddess who passes up those who are unprepared with liquid capital.”

Or, use all that excess cash to scalp some upcoming profits on Twitter. Just be sure keep that $30 stop in place (more on that below).

The quote of the day: “It appears that the easiest thing CEOs can do at this point to keep the price of their stock going up and their salaries growing is to engage in massive layoffs.” — Michael Harris of the Price Action blog.

The economy: Initial weekly unemployment claims numbers hit early, and showed jobless claims dropped 27,000 to 300,000. The second estimate of first-quarter GDP showed the U.S. economy contracted by 1% in the first quarter, the biggest decline in three years. Still to come, the pending home-sales index for April is due out at 10:00 a.m. Eastern. A 1% increase is expected.

The chart of the day: Zero Hedge posted this chart without adding much color. None is really needed, other than to warn that “the last time [stocks and bonds] got this disconnected (with negative breadth in stocks and super-low volatility), things went south very quickly.” With enough snark to fund a few more rounds of economic stimulus, the blogger added, “It’s different this time, though.”

The call of the day: When volatility leaves the market, traders tend to make some of their own. ChessNWine from the iBankCoin blog says he might have found a nice setup to scalp profits from Twitter
/quotes/zigman/23556538/delayed/quotes/nls/twtrTWTR. “In this market, I am finding these beaten-down growth stocks are making for good, quick snapback-rally long plays as long as I stay disciplined,” he wrote. Set the stops at $30 and take some off the table when it nears $40. Rinse and repeat. Piece of cake, right?

ChessNWine isn’t the only one warming up to the idea of a northbound Twitter. “The market has now priced in the expectation that Twitter remains a niche social-media product,” says one recent Twitter-upgrader from Nomura.

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Need to Know (NTK) guides investors to the most important, insightful items required to chart a course ahead of each trading day. Anchored by lead writer Shawn Langlois, NTK will sift through the fire hose of news, commentary and data, from traditional and non-traditional sources, and extract what’s most essential. You can start reading NTK here as it begins publishing at approximately 6:30 a.m. ET, or sign up here to get a version in your email box every morning at approximately 8:45. a.m. ET.